CFPB Proposes Simplifying HMDA Reporting

The CFPB proposed a rule Thursday that aims to simplify the Home Mortgage Disclosure Act reporting requirements for financial institutions. Institutions that produce fewer than 25 mortgages a year would be exempted from reporting requirements.

“For small banks with few staff members, this change could make a significant impact in easing compliance costs,” said the CFPB in a press release.

The new threshold would reduce the overall number of banks required to report HMDA data by 25%, but, because those lenders receive a low volume of applications and originate a low volume of mortgage loans, the change would not compromise the usefulness of the dataset, the CFPB also said.

Under the proposal, financial institutions that make 25 or more closed-end loans or reverse mortgages in a year would be required to report HMDA data. However, the proposal eliminates reporting certain home improvement loans. Financial institutions with a large amount of reported transactions would be required to submit HMDA data on a quarterly basis rather than an annual basis.

“It is critical that we shed more light on the mortgage market – the largest consumer financial market in the world,” CFPB Director Richard Cordray said. “The Home Mortgage Disclosure Act helps financial regulators and public officials keep a watchful eye on emerging trends and problem areas in the mortgage market. Today’s proposal would help us understand better how to protect consumers’ access to mortgage credit while simplifying the reporting requirements for financial institutions.”

The CFPB is also proposing ways to align HMDA data requirements with well-established industry data standards, which could alleviate the burden on many lenders, and improve the quality of the information reported.

“While the proposal’s efforts to amend institutional and transactional coverage could provide some relief for credit unions, its expansion of the HMDA dataset will undoubtedly create additional expenses and burden for credit unions, NAFCU Director of Regulatory Affairs Mike Coleman said. “Any additions to the HMDA dataset will require credit unions to work with their staffs and vendors to update their processes and software. Because credit unions already grapple with overwhelming regulatory burden, NAFCU believes the Bureau should eliminate unnecessary burden to credit unions and restrict its changes to the HMDA dataset to those mandated by Dodd-Frank.”

Under the Dodd-Frank Act, the CFPB is required to update HMDA regulations by having lenders report specific new information, including the applicant’s age and credit score, property value, loan term, total points and fees and the duration of any teaser or introductory interest rates. The CFPB said the new information could help identify possible discriminatory lending practices and other issues in the marketplace.

The CFPB is also evaluating new technological tools that would make the electronic data submission process more efficient, simplify data formatting requirements andhelp financial institutions prevent reporting errors.